Broking Insights The Indian broking industry is one of the oldest trading industries that has been around

even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalisation period, the industry has found its way towards sustainable growth. With the purpose of gaining a deeper understanding about the role of the Indian stock broking industry in the countrys economy, we present in this section some of the industry insights gleaned from analysis of data received through primary research. For the broking industry, we started with an initial database of over 1,800 broking firms that were contacted, from which 464 responses were received. The list was further short listed based on the number of terminals and the top 210 were selected for profiling. 394 responses, that provided more than 85% of the information sought have been included for this analysis presented here as insights. All the data for the study was collected through responses received directly from the broking firms. The insights have been arrived at through an analysis on various parameters, pertinent to the equity broking industry, such as region, terminal, market, branches, sub brokers, products and growth areas. Some key characteristics of the sample 394 firms are:

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On the basis of geographical concentration, the West region has the maximum representation of 52%. Around 24% firms are located in the North, 13% in the South and 10% in the East 3% firms started broking operations before 1950, 65% between 1950-1995 and 32% post 1995 On the basis of terminals, 40% are located at Mumbai, 12% in Delhi, 8% in Ahmedabad, 7% in Kolkata, 4% in Chennai and 29% are from other cities From this study, we find that almost 36% firms trade in cash and derivatives and 27% are into cash markets alone. Around 20% trade in cash, derivatives and commodities In the cash market, around 34% firms trade at NSE, 14% at BSE and 52% trade at both exchanges. In the derivative segment, 48% trade at NSE, 7% at BSE and 45% at both, whereas in the debt market, 31% trade at NSE, 26% at BSE and 43% at both exchanges Majority of branches are located in the North, i.e. around 40%. West has 31%, 24% are located in South and 5% in East In terms of sub-brokers, around 55% are located in the South, 29% in West, 11% in North and 4% in East Trading, IPOs and Mututal Funds are the top three products offered with 90% firms offering trading, 67% IPOs and 53% firms offering mutual fund transactions In terms of various areas of growth, 84% firms have expressed interest in expanding their institutional clients, 66% firms intend to increase FII clients and 43% are interested in setting up JV in India and abroad In terms of IT penetration, 62% firms have provided their website and around 94% firms have email facility

Terminals Almost 52% of the terminals in the sample are based in the Western region of India, followed by 25% in the North, 13% in the South and 10% in the East. Mumbai has got the maximum representation from the West, Chennai from the South, New Delhi from the North and Kolkata from the East. Mumbai also has got the maximum representation in having the highest number of terminals. 40% terminals are located in Mumbai while 12% are from Delhi, 8% from Ahmedabad, 7% from Kolkata, 4% from Chennai and 29% are from other cities in India.

Branches & Sub-Brokers The maximum concentration of branches is in the North, with as many as 40% of all branches located there, followed by the Western region, with 31% branches. Around 24% branches are located in the South and East constitutes for 5% of the total branches of the total sample. In case of sub-brokers, almost 55% of them are based in the South. West and North follow, with 30% and 11% sub-brokers respectively, whereas East has around 4% of total sub-brokers.

Financial Markets The financial markets have been classified as cash market, derivatives market, debt market and commodities market. Cash market, also known as spot market, is the most sought after amongst investors. Majority of the sample broking firms are dealing in the cash market, followed by derivative and commodities. 27% firms are dealing only in the cash market, whereas 35% are into cash and derivatives. Almost 20% firms trade in cash, derivatives and commodities market. Firms that are into cash, derivatives and debt are 7%. On the other hand, firms into cash and commodities are 3%, cash & debt market and commodities alone are 2%. 4% firms trade in all the markets.

In the cash market, around 34% firms trade at NSE, 14% at BSE and 52% trade at both exchanges. In the equity derivative market, 48% of the sampled broking houses are members of NSE and 7% trade at BSE, while 45% of the sample operate in both stock exchanges. Around 43% of the broking houses operating in the debt market, trade at both exchanges with 31% and 26% firms uniquely at NSE and BSE respectively.

Of the brokers operating in the commodities market, 57% firms operate at NCDEX and MCX. Around 20% and 21% firms are solely in NCDEX and MCX respectively, whereas 2% firms trade in NCDEX, MCX and NMCE.

Products The survey also revealed that in the past couple of years, apart from trading, the firms have started offering various investment related value added services. The sustained growth of the economy in the past couple of years has resulted in broking firms offering many diversified services related to IPOs, mutual funds, company research etc. However, the core trading activity is still the predominant form of business, forming 90% of the firms in the sample. 67% firms are engaged in offering IPO related services. The broking industry seems to have capitalised on the growth of the mutual fund industry, which was pegged at 40% in 2006. More than 50% of the sample broking houses deal in mutual fund investment services. The average growth in assets under management in the last two years is almost 48%. Company research is another lucrative area where the broking firms offer their services; more than 33% of the firms are engaged in providing company research services. Additionally, a host of other value added services such as fundamental and technical analysis, investment banking, arbitrage etc are offered by the firms at different levels.

Of the total sample of broking houses providing trading services, 52% are based in the West, followed by 25% from North, 13% from South and 10% from the East. Around 50% of the firms offering IPO related services are based in the West as compared to 27% in North, 13% in South and 10% in East. In providing mutual funds services, the Western region was dominant amounting to 49% followed by 27% from North; The South and the East are almost at par with 13% and 11% respectively. Future Plans 68% of the firms from the sample have envisaged strategies for future growth. With the middle class Indian investor as well as foreign investor willing to invest in the stock market, majority of the firms preferred expansion of institutional and the Foreign Institutional Investor clients in their areas of growth. Around 84% have shown interest in expanding their institutional client base. Nearly 51% of such firms are located in the West, 25% in North, 15% are from South and 9% from East. Since the past couple of years, India, along with Korea and Taiwan, has been one of the preferred destinations for the FIIs. With corporate restructuring, rising market capitalisation and sectoral friendly policies helping the FIIs, more than two thirds of the firms are interested in increasing their FII client base. Amongst these firms, West again has maximum representation of 53%, followed by North with 22%. South has 15% firms and East makes up for 9%.

Purpose of this article :

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Understand basics of Online Stock Market Trading in India. Provide detail about popular online stock trading companies in India. Compare and discuss about stock trading websites, their products and services.

Brief Introduction - Online Stock Market Trading

1.

Stock Exchange
Stocks (Shares, equity) are traded in stock exchange. India has two big stock exchanges (Bombay Stock Exchange - BSE and National Stock Exchange - NSE) and few small exchanges like Jaipur Stock Exchange etc. Click here to see the list of Stock Exchanges in India Investor can trade stocks in any of the stock exchange in India.

2. Stock Broker
Investor requires a Stock Broker to buy and sell shares in stock exchanges (BSE, NSE etc.). Stock Broker are registered member of stock exchange. A stock broker can register to one or more stock exchanges. Only stock brokers can directly buy and sell shares in Stock Market. An investor must contact a stock broker to trade stocks. Broker charge commissions (brokerages) for their service. Brokerage is usually a percent of total amount of trade and varies

from broker to broker.

3. Stock Trading
Traditionally stock trading is done through stock brokers, personally or through telephones. As number of people trading in stock market increase enormously in last few years, some issues like location constrains, busy phone lines, miss communication etc start growing in stock broker offices. Information technology (Stock Market Software) helps stock brokers in solving these problems with Online Stock Trading. Online Stock Market Trading is an internet based stock trading facility. Investor can trade shares through a website without any manual intervention from Stock Broker. In this case these Online Stock Trading companies are stock broker for the investor . They are registered with one or more Stock Exchanges. Mostly Online Trading Websites in India trades in BSE and NSE. There are two different type of trading environments available for online equity trading. 1. Installable software based Stock Trading Terminals These trading environment requires software to be installed on investors computer. These software are provided by the stock broker. These softwares require high speed internet connection. This kind of trading terminals are used by high volume intra day equity traders. Advantages:

 

Orders directly send to stock exchanges rather then stock broker. This makes order execution very fast. It provides almost each and every information which is required to a trader on a single screen including stock market charts, live data, alerts, stock market news etc.

Disadvantages:

  
2.

Location constrain - You cannot trade if you are not on the computer where you have installed trading terminal software. It requires high speed internet connection. These trading terminals are not easily available for low volumn share traders.

Web (Internet) based trading application These kind of trading environment doesn't require any additional software installation. They are like other internet websites which investor can access from around the world through normal internet connection. Below are few advantages and disadvantages of Online Stock Market Trading :Advantages of Online Stock Trading (Website based):

        

Real time stock trading without calling or visiting broker's office. Display real time market watch, historical datas, graphs etc. Investment in IPOs, Mutual Funds and Bonds. Check the trading history; demat account balance and bank account balance at any time. Provide online tools like market watch, graphs and recommendations to do analysis of stocks. Place offline orders for buying or selling stocks. Set alert to inform you certain activity on the stock through email or sms. Customer service through Email or Chat. Secure transactions.

Disadvantages of Online Stock Trading (Website based):

  

Website performance - sometime the website is too slow or not enough user friendly. Little long learning curve especially for people who doesn't know much about computer and internet. Brokerages are little high.

Online Stock Trading Companies in India

Some of the popular stock brokers in India Financial Market are:

1. ICICIDirect 2. Sharekhan 3. Indiabulls 4. 5Paisa 5. Motilal Oswal Securities 6. HDFC Securities 7. Reliance Money 8. IDBIPaisaBuilder 9. Religare 10. Geojit 11. Networth Stock Broking 12. Kotak Securities 13. Standard Chartered 14. Angel Trade 15. HSBC InvestDirect 16. Comfort Securities 17. Just Trade

Things to do before opening Online Share Trading Account

1. 2. 3. 4. Ask for Demo: Contact the broker who provide online trading service and ask him to give you a demo of product. Check if the broker trades in multiple stock exchanges. Usually most of the Online Trading Websites trade in NSE and BSE in India. Check the integration of Brokerage account, Demat account and Bank account. Compare brokerages with other peer companies.

Standard document require to open an Online Trading Account

1. Proof of residence (Address proof)

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2.

Driving license Voter's ID Passport Photo credit card Photo ration card Utility Bill (Telephone, Electricity etc) Bank Statement

Proof of identity

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Driving license Voter's ID Passport

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3. 4. PAN Card

Photo ration card

Two photographs